Eurozone Fundamental Problems Remain Unresolved
"Beneath the surface calm of lower spreads and lower tail risks, the
eurozone's fundamental problems remain unresolved. For starters,
potential growth is still too low in most of the periphery, given ageing
populations and low productivity growth, while actual growth – even
once the periphery exits the recession, in 2014 – will remain below 1%
for the next few years, implying that unemployment rates will remain
very high.
Meanwhile, levels of private and public debt, domestic
and foreign, are still too high, and continue to rise as a share of
GDP, owing to slow or negative output growth. This means that the issue
of medium-term sustainability remains unresolved.
At the same
time, the loss of competitiveness has been only partly reversed, with
most of the improvement in external balances being cyclical rather than
structural. The severe recession in the periphery has caused imports
there to collapse, but lower unit labour costs have boosted exports
insufficiently. The euro is still too strong, severely limiting the
improvement in competitiveness that is needed to boost net exports in
the face of weak domestic demand." - in The Guardian
Related ETFs: iShares Germany ETF (EWG), iShares MSCI Italy Index ETF (EWI), iShares MSCI Spain Index ETF (EWP)